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DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | 3 Months Ended
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Mar. 31, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES | DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESThe Company is exposed to market fluctuations in interest rates as well as variability in foreign exchange rates. In May 2019, the Company entered into an interest rate swap (cash flow hedge) with the JP Morgan Chase, N.A. (the "Swap Counterparty") and a cross-currency swap (net investment hedge) with the JP Morgan Chase, N.A. (the "the Bank Counterparty"). The Company's primary objective for holding derivative financial instruments is to manage interest rate risk and foreign currency risk. On May 28, 2019, the Company entered into a pay-fixed (2.05%), receive-floating interest rate swap with a notional amount of $108,569 and a maturity date of June 27, 2023. The Company's risk management objective and strategy with respect to the interest rate swap is to protect the Company against adverse fluctuations in interest rates by reducing its exposure to variability in cash flows relating to interest payments on a portion of its outstanding debt. The Company is meeting its objective since changes in the cash flows of the interest rate swap are expected to exactly offset the changes in the cash flows attributable to fluctuations in the contractually specified interest rate on the interest payments associated with the Credit Agreement. The net interest expense related to the interest rate swap contract were $513 and $521 for the three months ended March 31, 2022 and 2021, which were recorded in the consolidated statements of operations under interest expense, net. At the same time, the Company also entered into a pay-fixed (0.00%), receive-fixed (2.05%) cross-currency swap to manage foreign exchange risk related to the Company's net investment in Chemogas. The derivative has a notional amount of $108,569, an effective date of May 28, 2019, and a maturity date of June 27, 2023. Interest income related to the cross-currency swap contract was $550 and $556, respectively, for the three months ended March 31, 2022 and 2021, which was recorded in the condensed consolidated statements of operations under interest expense, net. The derivative instruments are with a single counterparty and are subject to a contractual agreement that provides for the net settlement of all contracts through a single payment in a single currency in the event of default on or termination of any one contract. As such, the derivative instruments are categorized as a master netting arrangement and presented as a net derivative asset or derivative liability on the consolidated balance sheets. As of March 31, 2022 and December 31, 2021, the fair value of the derivative instruments is presented as follows in the Company's consolidated balance sheets:
Derivative assets (liabilities) |  | March 31, 2022 |  | December 31, 2021
Interest rate swap |  | $ | (74) |  |  | $ | (2,158) |
Cross-currency swap |  | 956 |  |  | (500) |
Derivative assets (liabilities) |  | $ | 882 |  |  | $ | (2,658) |
On a quarterly basis, the Company assesses whether the hedging relationship related to the interest rate swap is highly effective at achieving offsetting changes in cash flow attributable to the risk being hedged based on the following factors: (1) whether the key features and terms as enumerated above for the interest rate swap and hedged transactions match during the period (2) whether it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) whether the relationship qualifies for hedge accounting based on the Company's quarterly qualitative review. In addition, on a quarterly basis the Company assesses whether the hedging relationship related to the cross-currency swap is highly effective based on the following evaluations: (1) whether the Company will always have a sufficient amount of non-functional currency (EUR) net investment balance to at least meet the cross-currency notional amount until the maturity date of the hedge (2) whether it is probable that the Swap Counterparty will not default on its obligations under the swap, and (3) whether the relationship qualifies for hedge accounting based on the Company's quarterly qualitative review. If any mismatches arise for either the interest rate swap or cross-currency swap, the Company will perform a regression analysis to determine if the hedged transaction is highly effective. If determined not to be highly effective, the Company will discontinue hedge accounting. As of March 31, 2022, the Company assessed the hedging relationships for the interest rate swap and cross-currency swap and determined them to be highly effective. As such, the net change in fair values of the derivative instruments was recorded in accumulated other comprehensive income. Gains on our hedging instruments are recognized in accumulated other comprehensive income (loss) and categorized as follows for the three months ended March 31, 2022 and 2021:
|  | Location within Statements of Comprehensive Income |  | Three Months Ended March 31,
|  |  | 2022 |  | 2021
Cash flow hedge (interest rate swap), net of tax |  | Unrealized gain on cash flow hedge, net |  | $ | 1,573 |  |  | $ | 512 |
Net investment hedge (cross-currency swap), net of tax |  | Net foreign currency translation adjustment |  | 1,123 |  |  | 3,197 |
Total |  |  |  | $ | 2,696 |  |  | $ | 3,709 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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